Regulation of Airbnb is draconian

24 April 2019
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Government published the Tourism Amendment Bill on April 12. If this had happened on April 1, one could have believed that it was an April Fool’s Joke, so comical is the logic underlying the bill. The amendment, once adopted, will mean that all ‘short-term home rentals’ are legislated under the Tourism Act. 

The thinking behind the bill is so misguided that it will also allow the Minister of Tourism to specify certain ‘thresholds’ for Airbnbs in SA; these thresholds could include a limit on the number of nights a guest can stay in an Airbnb, or even how much income an Airbnb can earn. This proposed amendment is draconian - it grants the Minister too much power and severely limits the income and job opportunities people can generate for themselves and others through establishing an Airbnb hosting.

A spokesperson for the Department of Tourism told BusinessTech that: “These thresholds are not about being hard on (Airbnb) owners but making sure that everyone gets their fair share”. It is far, far removed from the moral remit of government to decide who gets their ‘fair share’ of anything; by what measure does the Minister, or representative of the Department, decide what constitutes a ‘fair share’? As always with these laws and edicts by government, the measure by which government decides who wins and who loses is left out of the discussion.

The philosophy behind this bill indicates that the Department views itself as the judge and jury of what you are ‘allowed’ to earn as an Airbnb host. What you earn as a host should be completely up to the rate you set and agree to with your customers, the demand for the accommodation you offer, and the quality of service you render. To presume that a government department must ensure that each bed and breakfast earns their ‘fair share’ indicates a fundamental lack of understanding of the nature of business, and of wealth, which is: Each person is not entitled to a slice of the economy; wealth is created by each person, for himself. Each person’s wealth is his own pie, to increase or lose based on his own decisions and choices. For the Department to place itself in the role of wealth ‘granter’ clearly shows that the officials who work there are completely ignorant of the concept of wealth; wealth is made, not granted or given.

Airbnb has enabled people previously unable to do so to make a living for themselves. Just as Uber opened up a whole new market for people in transportation, Airbnb has the same transformative potential in tourism. South Africa’s tourism is one of its last remaining and strongest selling points for foreigners to travel here and spend their international currencies. Anyone who tries to establish and run an Airbnb, just like a bed and breakfast, should be praised for the success they manage to attain. Taxes increase year on year; the price of petrol goes up, and, with it, the price of food. People are struggling to make a living and now the government is going to make it yet more difficult for those who are trying their utmost to improve their lives.

If a customer decides to stay in an Airbnb instead of a ‘traditional’ B&B, that is because they think they can get more value for their money at the Airbnb. It is each customer’s free, voluntary choice to trade with the establishment of his choice. And it is up to each Airbnb host and all other establishments to make their product as alluring and competitive as possible. Every business, whether it is an Airbnb or any other, must stand or fall on its own merits, without government favour.

If the Department of Tourism is truly concerned for the welfare of traditional establishments, it could remove restrictions on those businesses to make it easier for them to compete with Airbnb hosts. Once government regulates some businesses over others, it distorts the market and any potential for supply and demand to interact as they would in a free market. This, in turn, distorts prices for consumers and they will suffer in the long run. Furthermore, if any traditional B&B’s are calling for regulations on Airbnb, they must know that such a request is deeply immoral. To call for government force against one’s competitors indicates that one is unwilling to earn the customer’s money; these older establishments already have an advantage over new entrants because they are well-known. They are playing a very dangerous game; government can very quickly turn its expanded regulatory powers on any target it deems ‘too big’ or ‘earning too much’.

This Bill is an attempt by government to punish successful people who are working hard in an effort to better their lives. You do not encourage economic growth by imposing regulations; you encourage economic growth by removing as many regulations and restrictions as possible.

Chris Hattingh is a Researcher at the Free Market Foundation

 

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